Ruminations on Gold
Bitter Gold Traders
But Enda's enthusiasm is genuine. And that pisses us off. As veterans of so many failed formations in Gold we are a bit cynical. Maybe it is us. Perhaps it is we that are the problem. To be a Gold bull over the last 20 years is to be demoralized constantly. Not unlike living with a narcissist idiot or a Jehovah witness that won't take an aspirin. They cannot get it but we keep thinking they will someday and we stick around, hoping for Gold's enemies to take that aspirin. But it never comes. It never will.
We are the idiots for believing someday that Gold's price will reflect its true value. The idiots that control Gold's price will never let it reflect its true value. And that is because they aren't idiots. Just an unholy alliance of globalist academics, coin operated politicians, and financial hucksters looking to make a commission. Gold is just too hard to brand for them to make a profit. And so, we are the idiots. I can live with that.
As to the title's second half: I began "trading" commodity futures in 1987 as an intern on a Lehman Brother's retail equity desk. I've been witness to every commodity scandal from the Sumitomo Copper play, to the MG Oil trade, to the Ashanti 1999 Gold squeeze, various Oil and NG plays and everything in between having anything to do with Energy or Metals. And let's not forget Tyson Foods' payoff to Hillary Clinton with the "Winners to HRC / Losers to Tyson" account split. My firm at the time handled some of that flow. And the "I" pronoun is a composite of 4 people contributing to this missive to stop trading metals.
Price is Not Value
The Cross of Gold
Some examples Gold investors have had to battle over the last 50 years include:
Maybe it is us, but why do we keep insisting Gold is a store of value when so many aspects of the market are stacked against it? Why do we even look at the daily prices? That only makes us vulnerable to salesmen saying: "Buy GLD on CNBC"
The Late Bill Hicks makes our point about Marketers for us
Gold Has intrinsic Value, But Value and Price are not the Same thing
We know Gold is the best, truest store of value on earth when it is in our hands because it does not rust, it is inert, it cannot be synthesized, and because of its malleability and ductile characteristics as well as its conductivity, if it were to ever be cheaper than copper, it would be completely consumed for those characteristics.
We also know Gold futures and GLD are the worst trading vehicle on earth for us because of its liquidity gaps, homogeneous players, contract size, and susceptibility to manipulation. We trade it going in withoureyes open. You should not trade it at all. Stop trading Gold. Buy a Gold mine instead if you believe the price will go up.
To paraphrase Peter Lynch:
Price is the boat in the water. Value is the anchor dropped and sitting on the ocean floor. The rope between anchor and boat are its volatility. The waves are events. Gold is not volatile, its rope is not longfrom boat to anchor. But Gold is in a tiny, private ocean where some kid can make waves any time he wants to push the price as far away as he can from the value
Gold fund traders, with few exceptions are the sheeple; that keep getting fleeced. And in the process they run over the public's feeble attempts to protect its own wealth.
Why does anyone trade Gold from the long side if they've no intention or resources to take delivery? What is the point of marketing an asset that is supposed to be bought on dips as a store of wealth and thus a hedge for fiat debasement, as something that should instead be chased in rallies?
Brokers do not have investors, they have traders. As a one time student of Graham & Dodd's Securities Analysis, and a protege of a CFA who drilled me on value versus price, I find it stupid to tell someone to INVEST in something because it has gone up. To buy it because "The train is leaving the station" . These are not investment recommendations.
When you buy a stock with a PE of 20, you are buying a company that is expected to take 20 years to make back the money you invested. That is an important corollary of understanding PE. Investment means buying with money you do not need for a long period of time. Anything less than a 5 year time horizon is not an investment in a business, it is a speculation on a stock. Gold is a hedge for all your investment risk and should be held indefinitely
Gold is money. Silver is Not
It may not be government accepted currency, but it is money. And it is the last thing left competing with paper money on earth. That is incentive enough to do everything in a governments power to dissuade investment in it.
Cryptos are NOT MONEY. They are a currency and well suited as a transfer of wealth from one medium to another. But they are not money yet. And wont be accepted as money until governments and Banks can co-opt their use for "our benefit and protection".
Silver is not money for the same reason Gold is money. Silver is used industrially, is "consumed", and its supply is more readily grown if needed. Gold is not consumed or destroyed
Gold will continue to be money until one of 2 things happens
That is a paraphrase of Peter Bernstein's great book A Primer on Money, Banking, and Gold
BlockChain is Key to complete Monetization
The question is, if Gold is money, and the world will not allow it to be currency, what happens to it? This is where the blockchain phenomenon comes in. Imagine instant delivery of quantities less than 100 ounces? Imagine the cost savings dealer would enjoy and thus be able to sell gold in small increments like coins or grams with instant payment and delivery verification? Imagine banks without credit departments and offices that play the float on your money.
Gold may never be a government approved currency again. But it will continue to be money, and technologies like blockchain will make it more valuable as the pipeline between buyer and seller are made more secure.
In the meantime, stop trading Gold. Own it and keep the percentage you have as part of your portfolio stable whether that be 1, 5 of 10% .Stop playing the paper trading game. Think like China, buy to store wealth, not create it. Buy dips, not rallies.
But if you trade it as we do, keep your eyes open to the forces that influence it.
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